Next up in the hunt for Gulf oil riches: Newfoundland

A well near Canton, Pa., is seen in this 2012 file photo. Calgary’s Petrolia Oil & Gas Ltd. has finally shed light on the agreement it signed in 2008 with Hydro-Québec to explore for oil on Quebec’s Anticosti Island.

As Quebec moves to open a new oil play on an island in the Gulf of St. Lawrence, Newfoundland's regulator is set to issue a report that will help determine the pace of development in its waters in the Gulf.

The Canada-Newfoundland and Labrador Offshore Petroleum Board has concluded its environmental assessment of oil exploration in the Gulf. The report, which is expected in the coming weeks, will set the stage for Corridor Resources Inc.'s effort to get a drilling licence for its Old Harry prospect in the Gulf.

As Newfoundland's board completes its assessment, Quebec is expected to soon release its strategic review of its oil and gas prospects, including the environmental risks of operating in the Gulf. The province is also negotiating with the federal government to establish a joint regulatory board, similar to those that manage the offshore industry in Newfoundland and Nova Scotia.

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Both provinces are weighing the concerns of fishermen, aboriginal communities and environmentalists, who worry about the impact of hydrocarbon drilling on marine life in the Gulf, against the prospect of opening a new oil and gas frontier that would create jobs and generate revenue for governments.

The industry is hoping that exploration activity over the next two years will give a better indication of the resource base, including size and whether it's dry gas or liquids.

Some believe that early success would spur cautious governments to move more quickly to encourage further exploration.

"There is a general view from industry that the area holds some promise," said Paul Barnes, St. John's-based vice-president of the Canada Association of Petroleum Producers. "There would be prospects that could straddle both sides, so as an industry we want the regulatory clarity for the whole area."

Quebec Premier Pauline Marois took a big first step in transforming the province into an oil producer last week when she announced the government would launch a joint venture and provide up to $115-million to help finance $190-million in exploratory work on Anticosti Island, which is believed to sit atop promising quantities of oil and gas.

Provincial opposition critics and environmentalists slammed the decision, which would see companies drill exploration wells using hydraulic fracturing techniques. The fracking debate has roiled the province and the government has maintained a moratorium in the St. Lawrence lowlands, where companies such as Questerre Energy Corp. have shale gas leases.

In one Anticosti deal, state-owned Ressources Quebec will partner with Corridor, Petrolia Inc. and Paris-based Maurel & Prom, France's second-largest oil company, which is active in 12 countries including offshore Africa and the Caribbean. Ressources Quebec will also work with Junex Inc. in a separate effort.

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Critics worry the Anticosti effort coupled with a decision to allow drilling at Old Harry would provide momentum for the industry throughout the Gulf of St. Lawrence region. New Brunswick has also begun talks with Ottawa to establish a joint offshore board in anticipation of a land rush that could result from a successful Old Harry well.

"Environmentally speaking, this is a horror story," said Sylvain Archambault, director of the St. Lawrence Coalition in Quebec City.

Mr. Archambault said he doesn't expect Quebec to proceed with offshore drilling in the near future, due in part to the border dispute with Newfoundland and the lack of a federal-provincial management board for Quebec. But he said that could change quickly with success on Anticosti or at Old Harry, though the two prospects have very different geology.

Corridor still has to stickhandle past opponents who want no drilling in the Gulf. The regulatory review is essentially an update of a 2007 assessment, which concluded the exploration drilling would not put undue risk on the marine environment. But since then, residents of all four provinces bordering the Gulf have organized opposition to Corridor's plan.

Corridor chief executive Phillip Knoll said the company is still hopeful it can obtain a drilling licence, and would then look for a larger partner to help finance an exploration program. Under proposed new federal rules, energy companies operating in Canada's offshore need to post $100-million cash bond and have at least $1-billion in assets.

A successful well would "create momentum and interest from the industry," Mr. Knoll said. "The industry works in a herd mentality so if there is any modicum of success offshore with Old Harry, you'll see a number of other parties get interested."

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